The Reserve Bank of India (RBI) is unlikely cut key policy rate before April, even as some analysts expect it to ease monetary policy this month.
Following the government's status quo on fiscal consolidation, which has given room for lending rate cut by the central bank, analysts have started betting on rate cut as early this month, by taking into account the RBI's action last year.
Presenting his third budget on Monday, Finance Minister Arun Jaitley had kept the fiscal deficit target for the next fiscal year unchanged at 3.5 percent.
In 2015, the RBI had surprised the markets by announcing a 25 basis points cut in repo rate, just a few days after the presentation of budget.
However, a poll by Reuters shows that RBI governor Raghuram Rajan will not take such step and he would wait till April to take a decision on a rate cut. Nearly 20 of the 28 economists, who participated in the poll, are not expecting a RBI rate cut before April.
"Although we doubt the fiscal math, the fact that the government has been sticking to the stated math, in whatever way they are doing it, creates room for Rajan to cut rates soon," Kunal Kundu, India economist at Societe Generale, told Reuters.
"They will probably bring the fiscal deficit down in a way that is not desirable, by cutting public capex, but Rajan has indicated that even if fiscal consolidation leads to lower growth he would still be OK with it," he said.
